Prepare for Victoria's CSG rush

Coal seam gas is rapidly moving beyond the eastern basin states and Victoria plainly isn't ready for the development.

Coal seam gas mining is rapidly expanding beyond the eastern basin states. The Inquiry into Greenfields Mineral Exploration and Project Development in Victoria recommends the state government establish a process to consult stakeholders about the future development of coal seam gas. But Victoria’s laws simply aren’t ready for this new form of mining.

Mining is a relatively small component of the Victorian economy. In 2009-2010, this sector contributed $5.9 billion (2 per cent) of Victoria’s gross state product. The primary focus of the Victorian economy is agriculture, which covers approximately 60 per cent of Victoria. Coal seam gas expansion is likely to have a significant impact on this sector in Victoria. Striking a balance between farming and coal seam gas mining will, however, be difficult. The intersection between mining and agriculture, and in particular the impact that coal seam gas mining will have upon food security, is a major concern.

The Minerals Council of Australia has previously noted that “mining and agriculture” have co-existed for 150 years and that “mining operations' water consumption by volume could be largely offset by minor efficiency gains in the agricultural sector.” The Victorian division of the Minerals Council has largely rejected the impact of mining on food security, saying it’s “not a real concern for Australia.”

These conclusions do not, however, have any real cogency for coal seam gas mining, a new form of mining for Victoria. Any mining activity which diverts and degrades large quantities of water will inevitably have a significant impact upon the agricultural sector in Victoria.

Coal seam gas mining involves extracting methane gas from the coal seam. The extraction process involves the use of vast quantities of water, which is diverted from sub-surface aquifers. This diversion will inevitably affect farmers' and others' pre-existing entitlements to aquifers.

Coal seam gas mining also generates vast quantities of highly saline water. This water needs to be properly disposed or it could contaminate fresh water and cause further environmental degradation. The practice of hydraulic fracturing also has the potential to create connection between sub-surface aquifers, thereby generating cross-contamination.

The existing legislative framework in Victoria is patently inadequate. The current law in Victoria is the Mineral Resources (Sustainable Development) Act 1990 (Vic) (MRSD). The MRSD vests ownership of all minerals, defined to include hydro-carbons contained within coal (and therefore including coal seam gas) in the Crown. The MRSD does not mandate notification or consent from the landowner before mining operations start, but an applicant must get Ministerial approval before commencing work within 100 metres of an existing dwelling.

The MRSD allows licencees to enter into compensation agreements with landowners. However, these agreements relate to loss or damage that has already occurred and, significantly, have no connection to the value of the mineral which is extracted.

The MRSD does require mining applicants to obtain a “statement of economic significance” in circumstances where their application covers agricultural land. The minister can decide to exempt agricultural land from the application of a mining licence. But this only happens when the Minister decides that there would be greater “economic benefit to Victoria” in continuing the use of the land as agricultural as opposed to developing it for mining.

The MRSD does not clearly delineate how an exemption determination should be assessed. It appears, though, that the decision has an “economic” focus and “employment” and “revenue” considerations are highly relevant. The Greenfields Report has a strong focus on “direct and indirect” financial benefits associated with expanding the resources sector in Victoria. So it’s likely that agricultural exemptions will become increasingly difficult to obtain under the MRSD in the future.

The Greenfields report recommends development of a state-wide integrated, strategic land use policy framework to better manage “competing land uses” in Victoria. This recommendation is best implemented, as has occurred in New South Wales, with a Strategic Regional Land Use Policy. Under the policy, Strategic Regional Land Use Plans (SRLUPs) coordinate water management, water-use conflict and land-management.

This initiative should be reinforced by a code of conduct for coal seam gas mining, mandating land-access arrangements between mining applicants and land-owners and requiring proper and adequate disclosure of the nature and volume of any chemical additives which have been used.

These policies should then be supplemented by comprehensive changes to the MRSD as well as the Environment Protection Act 1970 (Vic) and the Water Act 1989 (Vic). These would ensure coal seam gas expansion is subjected to appropriate environmental and water licencing regulation.

The government should take the opportunity to engage the public in strategic choices concerning the co-ordination of Victorian resources. It must develop a policy framework capable of properly evaluating the consequences of coal seam gas development. In so doing, it should adopt a precautionary approach, commensurate with public expectations, that takes account of the risk of irreversible harm being inflicted upon Victorian land and the industries and livelihoods dependent on that land.

Samantha Hepburn is Associate Professor, School of Law, Deakin University.

Samantha Hepburn

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